The government has notified the Petroleum and Natural Gas Rules, 2025, introducing a modern regulatory framework designed to draw higher investment into India’s oil and gas sector and improve ease of doing
business. Issued under the recently enacted Oilfields (Regulation and Development) Amendment Act, 2025, the rules overhaul the licensing regime and replace the older system of multiple permissions with a single petroleum lease for exploration, development and production of all hydrocarbons, including shale.
Single Licence, Longer Tenure and Stability of Terms
Under the new framework, companies will now operate through a single petroleum lease that covers the entire value chain of mineral oil operations. Lease tenures may run up to 30 years and be extended for the full economic life of a field, giving operators greater certainty to make long-term investment decisions. The rules also ensure protection against adverse changes to terms during the operational period.
Shift From Criminal to Financial Penalties
Criminal penalties have been removed and replaced with stringent financial penalties. Violations may attract a penalty of ₹25 lakh, along with an additional ₹10 lakh for every day the breach continues. The intent is to modernise the compliance system while avoiding criminal prosecution for operational matters.
Push for Efficiency: Shared Infrastructure and Transparency
Lessees will now be allowed to jointly develop or share infrastructure by mutual agreement, encouraging cost optimisation and faster field development. Companies must also file an annual declaration with the government detailing their installed, utilised and excess capacity across infrastructure assets.
Environmental Mandates: Zero Flaring and Emissions Control
The rules place clear responsibilities on operators to implement time-bound plans for zero gas flaring and to reduce greenhouse gas emissions. These provisions signal a shift toward cleaner upstream operations.
Faster Approvals and Investor-Friendly Dispute Resolution
Applications for petroleum leases must be decided within 180 days, ensuring timely approvals. Dispute resolution has been streamlined as well; if all contracting parties are Indian companies, arbitration will be seated in New Delhi. Where any party is a foreign company, they may opt for a neutral international arbitration seat, a move aimed at improving investor confidence.
Strengthened Offshore Safety Oversight
The Oil Industry Safety Directorate has been designated as the competent authority for offshore safety, audits and standard-setting across exploration and production activities.
Mandatory Reporting and Compliance Obligations
National oil companies and private operators must promptly report all existing and new discoveries, submit field development plans within set timelines and secure central government approval for development areas. Regular reporting on development and production activities is also mandatory.
Government and Industry Welcome the Reform
Announcing the change, Oil Minister Hardeep Singh Puri said, “In a landmark moment today, the Petroleum and Natural Gas Rules, 2025, have been amended to offer ease of business and operations,” adding that a single petroleum lease will allow lessees to undertake all mineral oil operations and pursue decarbonisation and integrated energy projects.
Vedanta Group chairman Anil Agarwal described the notification of the new rules as “a truly historic development”, saying the reforms finally create the environment needed to unlock India’s untapped hydrocarbon potential. He said India already produces some of the most affordable oil and gas in the world and these changes will help boost domestic output, reduce import dependence and strengthen energy security. Agarwal added that with these reforms, he believes India can eventually produce at least half of its energy requirements domestically.
